What is a general partnership?
A general partnership is also sometimes called a commercial partnership. It is a company in which at least 2 persons work together under one common name. Every person who participates becomes a partner. Every partner contributes something. This can be money, as well as goods or labour. There is no minimum amount of capital required. Since a general partnership is not a legal corporate identity, partners are personally liable for debts.
Dutch legislation on partnerships
The differences between general and professional partnerships (maatschappen) will cease to exist. This will have implications mostly for matters of liability for company debts, responsibility for specific contracts, and the division of profit. It is not yet known when the modernising of partnerships Act will come into force. Read more about the new rules.
Setting up a general partnership
It is mandatory to register your vof in the Business Register (Handelsregister) at the Netherlands Chamber of Commerce KVK (Kamer van Koophandel).
Draft a partnership agreement or vof contract (vennootschapscontract) stating the agreements made about powers, equity, profit sharing, etc. Doing so clarifies how you will do business together. You can do this yourselves; a civil-law notary is not required. A legal adviser, lawyer or accountant can also help you with this. You may have agreed certain maximum signing powers in your general partnership contract, e.g. €10,000. If you include this limit when you list your vof in the Business Register, it will also apply to third parties. Doing so clarifies the amounts that partners can sign for and allows business relations to verify this quickly and easily.
If a partner enters into an agreement outside of his or her signing powers, he or she is then personally liable, not the vof.
You will pay a one-off registration fee to register your vof in the Business Register. The costs for drawing up a partnership agreement differ depending on the civil-law notary or lawyer. On average, the cost are between €200 and €400. It is not mandatory to draw up a partnership agreement.
You are legally obliged to keep records. You can outsource this to a bookkeeper or accountant. The prices range from €500 to €1,000 per year.
Tool for choosing a Dutch legal structure
When setting up a business, you need to choose a legal structure, such as a vof, a sole proprietorship or a bv. There are several considerations to take into account, such as taxes, liability and staff. Use the Tool for choosing a Dutch legal structure to find out which legal structure best suits your company.
How is a general partnership taxed?
Partners in a vof pay income tax on their own share of the profits. Each partner is a self-employed individual and may be entitled to certain tax benefits and exemptions, such as entrepreneur allowance (ondernemersaftrek), investment allowance (investeringsaftrek) for environmental investments or small projects, and a tax-deferred retirement reserve (fiscale oudedagsvoorziening). Vofs also pay VAT.
A general partnership is not a legal corporate entity. This means that as a partner in a vof, you will be personally liable for the vof's debts, even if another partner is responsible for causing the debts. Creditors initially make a claim on the business assets and, if these are insufficient, on your partner's, then your and even your spouse's personal assets.
You can limit the effect on your spouse by drawing up a nuptial agreement.
Liability for partners entering after its formation
Be aware that a partner who enters into a partnership agreement after its formation is also liable for debts that arose before he or she joined. A new partner should therefore examine the vof's accounts fully and assess its financial position very carefully before entering into the partnership agreement.
It is, however, possible for new partners to make agreements with existing partners about how any pre-existing vof debts should be split. Partners leaving the general partnership remain jointly and severally liable for any debts incurred up to the point of leaving.
Partners can also make agreements about how debts should be split on leaving the partnership.
If your partner has personal debts, creditors are not entitled to make a claim on his or her business assets or your personal assets.
Filing annual accounts
If all managing partners in your general partnership are foreign, you will have to file your annual accounts with KVK.
UBO register: report your UBOs
Most businesses that register in the Dutch Business Register (including several European legal structures) have to include their 'ultimate beneficial owner(s)' or UBOs in the UBO register. See for more information the article The UBO register: questions and answers (KVK website).
Each partner is authorised to sign. This means that he may sign contracts or perform certain legal acts on behalf of the vof, such as reporting a change in the Business Register. If you want to limit the authority of partners, you can make agreements about this in the partnership contract and the Business Register.
A vof can also choose to appoint power of attorney to someone else. This person is then authorised to act on behalf of the company. It can be useful to register this person in the Business Register. This way your business partners also know who is allowed to act on behalf of the company.
If you choose to hire personnel, you have to pay payroll taxes and social contributions for your personnel. If you are hiring an employee for the first time, you must register as an employer with the Dutch Tax and Customs Administration. You must also report this to the Netherlands Chamber of Commerce. Read the checklist Employing staff in the Netherlands for more information.
Social security and national insurance contributions
As a partner in a vof, you are entitled to an old-age pension (AOW) when you reach retirement age. You will have to supplement this pension yourself. Start as soon as possible to keep your contributions affordable.
Because you are not an employee, you are not entitled to any of the benefits available to regular employees, such as sickness, unemployment or disability benefit (ziektewet, WW and WIA respectively). It is up to you to take out disability insurance as soon as you start your business.
Health insurance is mandatory and basic cover is sufficient. You pay a premium to your health insurance company and a contribution as part of your tax return.
Depending on your type of business, it can be wise to take out additional insurance.
Dissolving and liquidating a general partnership
The vof ceases to exist if a partner leaves the partnership agreement or dies. However, it is possible to include a survivorship or takeover clause in the vof contract, so that the remaining partners can continue running the business, e.g. by seeking a new partner or continuing as a sole proprietorship.
When dissolving your general partnership, you have to pay any outstanding debts and return each partner's share in the partnership agreement. This is called 'liquidation' or in Dutch vereffening. Any surplus is then distributed to the partners based on their share in the vof's profits. If there's not enough cash in the partnership to pay any outstanding debts, the partners will have to deposit additional funds into the partnership (based on their share in the debt).
Make sure you report the chances to KVK and the Dutch Tax and Customs Administration.
Changing the legal form of your business
You can change a vof into a private limited company (bv). One of the differences is that the bv is liable for finances and possible debts. There are several ways to change a vof into a bv. These steps are similar to changing a sole proprietorship into a bv.
If a partner leaves or dies, you can change the vof into a sole proprietorship. This is only possible if the partnership agreement contains a survivorship clause or take-over clause. This ensures that the partners who remain can take over the contributions of the departed or deceased partner.
Note: Be aware that for tax purposes, the Dutch Tax Administration views changes in legal structure as ending one business and starting another.
A 'husband-and-wife business' (man-vrouwfirma) is simply a general partnership between spouses/partners. If the Tax and Customs Administration (Belastingdienst) views both partners as being self-employed individuals, this means that they can benefit from double tax breaks.
A disadvantage of a man-vrouwfirma is that both partners are personally liable and a nuptial agreement provides no form of protection.
The Belastingdienst inspects man-vrouwfirma's very closely to check that both partners are actually active in the business for tax purposes. Both partners' involvement and input in the business have to be on an equal level.
Statistics: general partnerships
Number of general partnerships.